I’m looking at a duplex that has been newly renovated. Retail Value 80k. Potential Income from both units 1300/month(650 per unit). What should I put a offer in for? I’m thinking no more than 65k? Please Advise. Thanks

Have you done a cash flow analysis using the actual mortgage payment? I’d say \$56K would be better, so that you’d have at least 30% equity.

Mike

Thanks! It will be hard if I don’t get it for that price to pass up. But you know what if I pay any more for it I would be gambling and not investing

what makes this property in particular such a good deal?

What do you mean? If you get a duplex(2 units) for 56k and its worth 80k and you can rent each unit for 650 per month. Lets do the math:

Total Expense + Total Debt - Gross Income = Cash Flow
2400(Estimate) + 7800 - 15600 = 5400

5400 / 12 = 450/month Cash Flow!

Kjmoney,

You’re incorrectly calculating cash flow. Operating expenses range from 45%-50% in the U.S. Therefore, to accurately calculate cash flow divide your gross rent by 2 and the other half is used to pay the mortgage.

\$1300 / 2 = \$650

\$650 - \$410 (30yrs @ 8%) = \$240 positive cash flow monthly

I guess Carlton Sheets is wrong. Thanks

Yeah – we see a lot of that.

Keith

What can be done to increase the cash flow on his deal?

The biggest impact that you can have on cash flow is to buy at a bigger discount which will lower the mortgage payment. Most of the expenses are relatively fixed (assuming that you’re already doing things right).

\$240 per month positive cash flow for a duplex isn’t bad. If you do the management and maintenance yourself, you will EARN another 15% (or so) of the gross rents.